What is meant by performance management?

Introduction

Helping employees perform well is a central role of line managers and people professionals. People are the greatest creators of organisational value, so effectively managing their performance is critical for success. Employees need to understand what’s expected of them, and must be managed so that they are motivated, have the skills, resources and support they need to succeed, and are accountable for their work. 

This factsheet describes core aspects to get right in performance management and recent shifts in thinking. It summarises the main tools used, including objective setting, performance ratings, appraisals (or reviews), feedback, learning and development, and performance-related pay.

See the full A-Z list of all CIPD factsheets. 

‘Performance management’ describes the attempt to maximise the value that employees create. It aims to maintain and improve employees’ performance in line with an organisation's objectives. It’s a not a single activity, but rather a group of practices that should be approached holistically. 

There’s no standard definition of performance management but it describes activities that:

• Establish objectives for individuals and teams to see their part in the organisation’s mission and strategy.
• Improve performance among employees, teams and, ultimately, organisations.
• Hold people to account for their performance by linking it to reward, career progression and termination of contracts.

At its best, performance management centres on two-way discussion and regular, open and supportive feedback on progress towards objectives. It brings together many principles that enable good people management practice, including learning and development, performance measurement and organisational development. 

As well as helping people improve performance, a central strand of performance management is setting and reviewing objectives. The basic cycle is straightforward, as illustrated in Diagram 1. However, as shown in Diagram 2, there are other factors that make it more complex. We discuss these factors in the following sections.  

Performance management is usually backed up by formal processes, including recording objectives, periodic performance reviews and improvement plans for underperformance, but it is broader than these things. While policies and processes can be important, the main focus should be regular performance discussions that help people perform.

Please scroll to the bottom of the factsheet to view the transcript of this video.

Useful contacts and further reading

Contacts

Acas – Performance management

Center for Evidence-Based Management provides a database of evidence summaries on effective management

Books and reports

ACAS. (2018) ‘Improvement required’? A mixed-methods study of employers’ use of performance management systems. London: Acas.

ARMSTRONG, M. (2017) Armstrong's handbook of performance management: an evidence-based guide to delivering high performance. 6th ed. London: Kogan Page. 

ASHDOWN, L. (2018) Performance management: a practical introduction. 2nd ed. HR Fundamentals. London: CIPD and Kogan Page.

Visit the CIPD and Kogan Page Bookshop to see all our priced publications currently in print.

Journal articles

ARMSTRONG, M. (2017) How can we fix performance management?People Management (online). 17 November.

CAPPELLI, P. and TAVIS, A. (2016) The performance management revolution. Harvard Business Review. Vol 94, No 10, October. pp58-67. Reviewed in In a Nutshell, issue 62.

FARAGHER, J. (2018) How to get managers on board with performance management. People Management (online). 24 May.

MURPHY, K. (2019) Performance evaluation will not die, but it should. Human Resource Management Journal (online). 16 October. Reviewed in In a Nutshell, issue 92.

CIPD members can use our online journals to find articles from over 300 journal titles relevant to HR.

Members and People Management subscribers can see articles on the People Management website.

This factsheet was last updated by Jonny Gifford, Senior Adviser for Organisational Behaviour, CIPD

A central focus of Jonny’s work is applying behavioural science insights to core aspects of people management. Recently he has led programmes of work doing this in the areas of recruitment, reward and performance management.

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Video transcript

There have been a lot of changes to performance management over recent years, or at least some organisations have made massive changes. Our own research shows that a lot of these trends are really helpful. So we find the research backs up the view that performance management should be done more continually. Appraisal is not just something that happens once or twice a year, but it's more ongoing performance conversations that we need to be cultivating.

But there were also some ideas that we challenge when we look at the research. So for example, the idea that employees need to be involved in setting their own targets. It may sound counterintuitive, but this is not something which is backed up by research.

There are a range of factors in performance management to try and get right - performance management is not a single technique. One of the examples that I think is very positive is bringing in a strengths-based approach when you're looking at helping people to learn and improve their performance. The idea of this comes from appreciative inquiry. It's the idea that your opportunities for growth and improvement don't come so much from fixing your weaknesses or correcting what you're not good at. It comes more from understanding what it is you've been doing that's worked well. What was it that you did that contributed to that, and how can you expand on, build on, replicate that in other areas of your work.

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